Most people are at least a bit familiar with contract “boilerplate” clauses. They are the clauses that inevitably appear at the end of a contract that look suspiciously similar to clauses found at the end of other contracts that have very little else in common. The purpose of contract boilerplate clauses is not to add to the length of the contract so that the lawyer can pad his billable hours – each clause exists for a specific reason. The following are some examples:

Attorneys' fees: If a legal dispute arises, the losing party must pay the winning party’s legal fees. This raises the cost of litigation and lowers the parties’ willingness to engage in it.

  • Arbitration: All disputes must be resolved through arbitration rather than courtroom litigation. Arbitration rulings are typically non-appealable. This saves time and money but is dangerous because the losing party has no recourse to the courts.

  • Jurisdiction: This clause determines where a lawsuit can be filed (the specific county) to prevent “forum shopping” by parties seeking a home-court advantage. It is not the same as a choice of law clause (a California court can resolve a dispute under Louisiana law, for example).

  • Severability: What happens if a judge invalidates one clause of a contract (for example, California often strikes down non-compete clauses in employment agreements)? A severability clause allows the remainder of the contract to remain intact.

  • Merger: A “merger” or “entire agreement” clause asserts that the contract represents the entire agreement between the parties (at least with respect to subject matter relevant to the contract) on the date that the contract is signed. This prevents either party from asserting that a prior agreement, exchange of memos, or verbal assurance can be considered part of the agreement between the parties.

  • Force majeure: What happens if a hurricane destroys my warehouse? What happens if the product you ordered is declared illegal under local law? A force majeure clause excuses a party from performing their duties under the contract if an unforeseen event makes it impossible or highly impractical to do so.

  • Indemnity. In an indemnity clause, one party agrees to pay the costs of certain disputes asserted by third parties. In a classic example, I license software to you and a third party sues you for copyright infringement claiming that the algorithm actually belongs to him and not me.

  • Confidentiality. A confidentiality clause guarantees that neither party will disclose some or all of the information they learned during the course of negotiating or performing the contract.

The foregoing is only a sample of possible “boilerplate” clauses. It is critical to remember that you should never use a generic boilerplate clause that you find online or in another contract. Each contract is unique and should be treated as such. Your “boilerplate” should reflect your particular needs and concerns.

At CKB Vienna LLP, we can help you draft business contracts that avoid disputes and help you win disputes that have already arisen. Call us at 909-980-1040 or fill out our online contact form to learn how we can assist you. We serve clients from all over the Rancho Cucamonga area, including Alta Loma, Etiwanda, Upland, Fontana, Ontario, Chino Hills, and Claremont.